투자자 운동 깃발을 들어라


SRI in Asia: Watch the Issues, Not the Funds

Last yearwas a breakthrough year for SRI in Asia. It was the year that SRI, in its many guises, made the transition from foreign import to domestic product. There is no better indication of grass roots trends in Asia than the business strategies of venture stage Asian companies. As a result, 2004's World Resources Institute Sustainable Venture Forum Competition in Beijing and ASrIA's own International Conference in Singapore offered some fresh insights into the opportunity for SRI in Asia.

The three finalists in the competition included a company exporting organic passion fruit drinks from poor areas in Yunnan, a Beijing-based company making energy efficient turbines, and a company in Fujian which recycles rubber extracted from the growing mountain of discarded tires in coastal China. The management teams were experienced and articulate about the sustainability issues driving their businesses. At the same time, they also demonstrated all of the hallmarks of emerging market investment risk. The forecast financials sounded less than reliable, managements were united in their optimism but vague about marketplace conditions, and all had realistic worries about changing government rules and the theft of intellectual property.

This is the challenge for SRI in Asia. The potential is immense because the opportunities and the entrepreneurs are there in droves. The risk of failure is daunting however. Pollution is choking Asia and more sustainable production processes are desperately needed. But given the diversity of the region, policy and market structures are developing slowly and in an uneven pattern. As a result, SRI funds are a near-term driver for change only in Japan and Australia, while it is public concern about sustainability issues and growing political risk for politicians which underpin the sustainability debate, especially in Korea, Singapore, Malaysia, and China.

AsiaSRI with a Twist

If 2004 was the year that the case for SRI took on a discernibly Asian face, 2005 should be the year for pragmatism. The issues are clear. What is unclear is how markets, companies,and governments will respond. To put this in focus, let's take a tour through some crucial facets of Asia's sustainability landscape which should lay the groundwork for SRI going forward.

Some Weak Links in the Global Supply Chain

Asian operations are arguably the greatest source of sustainability risk for most global multinationals (MNCs) with cost sensitive manufacturing. For the past five years, the race to minimize costs through outsourcing and the development of Asian-based manufacturing has become a substitute for strategic thinking. We are now at a stage when MNCs may start paying the price for bad partnerships, poor risk management of supply chain relationships, and opaque operating conditions.

Why make such dire predictions? It's simple: labor and material costs are rising across Asia in response to growing labor unrest in China, higher energy-linked input costs, and immature management controls. A groundswell of labor disruption has become the new reality in China's Pearl River Delta as China's migrant labor force pushes back and government officials come under growing pressure to enforce legitimate workplace standards.

The early warning signs for these risks are evident in the sustainability and annual reports of experienced Asia-oriented MNCs. Look for comments about "engaging" the work force, Asian partners, outside community groups. The smarter companies have spotted the risks, but the first world tools for dealing with them are not necessarily a fit for the chaotic realities of Asia's supply chain.

Getting Older, FasterFunding Asia's Retirement

It is also time to watch for signs of progress from Asia's pension officials about SRI issues. While the SRI community in developed countries is built on a base of mutual funds, pension investors, and activists, Asia's relatively undeveloped managed funds market has yet to be a forceful catalyst for SRI sensibilities. Key sustainability concerns are working their way into mainstream market debates, however, often in the context of highly embarrassing scandals involving the investment of public pension funds.

The simple reality is that policymakers are struggling to fund growing retirement obligations through immature capital markets. Large government privatizations, new high yield instruments, and fledgling moves into overseas investment have all been triedwith mixed results. Now Asian taxpayers and investors are beginning to demand more public dialogue about government investment policies. This has brought the vocabulary of SRI into the mainstream in some Asian countries. The next step will be evidence that pension officials are looking to SRI principles to achieve better risk-adjusted returns.

Telling the Truth

Telling the truth just isn't as easy as we would like, regardless of which region or market you look at. It can be even harder in Asiawhere corporate ownership is highly concentrated, often in the hands of founding families or the government, and regulatory structures are erratic at best. This is one explanation for the obvious discomfort of the companies in Beijing when it came time to offer a candid picture of financial and technical details. It has also driven virtually every stock market regulator in the region to use the fallout from corporate meltdowns to upgrade corporate law and listing requirements.

What is still missing is a real culture of disclosure and long-term investment. Many institutional investors in Asia are covert fans of inside information because they think they have the edge in getting it. This leavesretail investors to struggle with volatile market trends and has reinforced thepreference for short-term speculation rather than long-term investment. As a result, Asia's best hope for progress may not be better enforcement but greater access to the courts as minority shareholders gradually win the right to sue to protect their ownership rights.

Banks Rule

One element of the case for SRI is that listed companies will respond to investor concerns or face negative consequences in share price valuation. An unstated aspect of this argument is the assumption that access to equity markets is crucial for companies to fund themselves. To the extent that this is true, prevailing funding patterns in Asia pose a challenge to SRI advocates. This is because incremental capital expenditure in Asia is typically funded by banks, not by the equity markets. In countries like China, the reliance on bank funding has biased the funding landscape even further because domestic banks channel much of their capital to state-owned enterprises, leaving many entrepreneurial companies structurally under-funded.

This bank-heavy funding structure has compounded sustainability risks in many Asian markets and limited the impact of more knowledgeable and mobile equity investors.
While some global banks with a large presence in Asia have proven responsive to dialogue about the SEE risks in their lending portfolios, most domestic Asian banks are insulated from this debate. As a result, ASrIA and partners around the region are increasingly looking at projects that will shine a light on credit risk decisions.

What Next?

Asia's varied SRI terrain suggests some important opportunities for SRI investors and sustainability advocates. There is now strong public support in Asia for better performance across the sustainability spectrum, so the key is to focus on areas where progress can be demonstrated.

Stay Focused on the MNCs

SRI investors have every reason to press MNCs for higher standards. They generally have the greatest exposure to Asian supply chains and are often hoping to tap into growing Asian markets for customers. It is crucial that they act as a positive force for market development. There are subtleties to the analysis however. Most MNCs know that US investors don't really understand the operating realities in Asia and are often reluctant to talk about the compromises involved in building partnerships in Asian markets. There is also typically a huge gap between formal legal requirements and enforcement which complicates the effort to define realistic best practice. ASrIA and Bank Sarasin recently teamed up on a report entitled Made in ChinaIs This a Sustainable Label? to explore how investors can evaluate these issues.

Despite the challenges, there is leadership on display from some MNCs, especially those which are trying to find more candid strategies for disclosing key aspects of their labor and environmental practices. Itis crucial that international investors pay more attention to these issues, especially as they begin to invest in Asian equities. Many Japanese and Australian companies have been multinationals for years. As their Chinese, Korean, and Taiwanese counterparts establish a more global footprint, it is essential they know that investors will be watching. The biggest Asian companies do compete for global equity capital and for more market access, creating a more positive dynamic for SRI investors.

Asian Governance Funds

Despite the pioneering efforts of a few SRI funds around the region, they have an established place in the market only in Australia and Japan. Nevertheless, there is obvious interest in SRI-linked strategies elsewhere. In the wake of repeated corporate scandals, there are strong signs of support for corporate governance funds in markets like Korea. Two small governance funds have received backing from government pension funds in Korea and there are efforts to encourage corporate governance indexes in several markets.

The global SRI community needs to be a strong supporter of these efforts even if anembrace of the full SRI agenda may be some years down the road. Governance funds have the potential to be the first step toward better protection of minority investors' rights. Being green is good, and many Asian companies can talk to you about their ISO14001 qualifications, but without marketplace incentives for improved disclosure, investors may not be in a position to know whether the qualification is simply a plaque on the wall or a broad commitment to better practices.

Beware of Questionnaires

It is an odd aspect of international investing that inexperienced international investors will often believe things about Asian companies that they would never believe about a NASDAQ-listed company based in an exotic tropical state like Florida. Foreign can be fun, but there is a tendency for novice global portfolio managers to rely too heavily on the pre-screening done by others.

Too many Asian companies, including prominent members of the FTSE4Good and DJSI, say that they are bombarded by questionnaires, but not by knowledgeable SRI investors who know the markets, their peers, and sector-based operating risks. Asian equities do not drive most global SRI portfolios, but risks associated with Asia will shape performance of many global stocks.

It is time for SRI investors to go a step further in their understanding of the region. They also need to meet Asian companies, regulators, NGOs and investors, so the SRI message is heard more strongly. Absent real contact with knowledgeable SRI investors, companies like the participants in WRI's venture forum, will struggle to decide whether the hard work involved in building a sustainable business will be valued by SRI investors.[국문요약] 지난해는 아시아에서 SRI가 돌파구를 찾은 한 해였다.
SRI가 수입품에서 토산품으로 탈바꿈한 셈이다.
아시아에는 무한한 기회가 있지만 실패의 위험도 도사리고 있다.
환경오염이 아시아를 숨 막히게 하고 있는 것이다.
앞으로 보다 더 지속가능한 생산이 절실히 필요하다.
하지만 아시아에서의 SRI 발전은 아직 느리고 지역적으로 많은 편차를 보이고 있다.
일본과 오스트레일리아에서는 SRI펀드가 변화의 동력으로 자리 잡았다.
또 한국, 싱가포르, 말레이시아, 중국에서는 지속가능 논쟁에 대한 대중적 관심이 증가하고 있다.
2005년 올 한 해는 SRI가 실용적으로 자리매김해야 한다.
이를 위한 논점은 분명하다.
하지만 시장, 기업, 정부가 어떻게 반응하느냐는 여전히 애매한 부분이다.
아시아에서의 SRI 지속가능성 전망을 중요한 측면 몇 가지로 나눠 살펴보면, 우선 세계 공급체인의 취약 부분을 꼽을 수 있다.
비용 민감 제조구조를 가진 대부분의 다국적 기업에게 아시아 영업활동은 지속가능성의 가장 큰 위험 요인이다.
지난 5년 동안의 비용 절감을 위한 아웃소싱의 결과, 이제 다국적 기업은 중국에서의 노동 문제 악화, 에너지 소비 증가, 미성숙한 관리 통제 등으로 인한 부작용의 대가를 치러야 할 시점에 와 있다.
두 번째로 퇴직 연금의 확대가 있다.
아시아의 납세자와 투자자들이 정부의 투자정책에 보다 많은 대화 요구를 하고 있다.
이에 따라 아시아 퇴직연금 관리자들은 SRI의 원칙에 더욱 관심을 가져야 한다.
세 번째는 진실을 말하기이다.
아시아와 같이 기업의 소유권이 집중되어 있는 곳에서는 진실을 말하는 것이 쉬운 일은 아니다.
그러나 아시아의 성장에 가장 큰 희망은 소액 주주들이 법정 투쟁을 통해 자신들의 소유권을 보호하는 권리를 갖는 것이다.
마지막으로 은행 규제이다.
주식시장은 기업의 자금 조달을 위해 반드시 필요하다.
이런 측면에서 과도한 은행부채를 가진 기업 재무구조 문제는 많은 아시아 시장에서 복합적인 지속가능성을 위협하고 있다.
아시아 사회책임투자협회(ASrIA)는 신용 위험에 대한 해결책을 제공하려 노력한다.
앞으로 아시아에서 다양한 범위에 걸쳐 지속가능성 개선에 대한 강력한 대중적 지원이 있어야 한다.
이를 위한 구체적 방안은 먼저 다국적 기업에 계속 집중하는 것이다.
아시아 시장의 발전을 위해 다국적 기업의 적극적인 역할은 필수불가결하다.
따라서 SRI 투자자들은 다국적 기업에게 좀 더 높은 표준을 갖도록 지속적으로 요구하려 한다.
다음으로는 공공재단을 만드는 것이다.
세계적 SRI 공동체는 기업 스캔들에 대한 소액 주주의 보호를 위한 노력을 계속하려 한다.
이를 위한 첫 단계로 소액 주주 보호운동을 지원하기 위한 공공재단을 만들 필요가 있다.
그리고 무엇보다도 직접적인 대화가 있어야 한다.
SRI 투자자들이 지역에 대한 보다 깊은 이해를 할 필요가 있다.
투자자들은 아시아 기업, 규제당국, 시민기구들과의 대화를 넓혀나가야 할 것이다.
구홍표/<사회책임투자>(필맥) 역자